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Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it has permanently barred Tod Bretton, former Chief Compliance Officer and Head Trader for Prestige Financial, Inc., of New York, for engaging in a fraudulent trading scheme that generated approximately $1.3 million in profits for him and his firm at the expense of customers by subjecting their orders to improper and undisclosed additional charges. To conceal the scheme, Bretton falsified order tickets and created inaccurate trade confirmations. Bretton also failed to cooperate with FINRA's investigation.
"Investors are entitled to have their stock trades handled properly by their brokers," said James S. Shorris, FINRA Executive Vice President and Executive Director of Enforcement. "In this case, Bretton ignored his obligations, choosing instead to enrich himself at the clients' expense, and to conceal this with falsified firm records. That he was both the Head Trader and Chief Compliance Officer for the firm makes this misconduct especially offensive."
FINRA found that, from at least September 2006 through June 2009, Bretton, working from the firm's New York office, engaged in a fraudulent trading scheme in which he took advantage of customers placing large orders (generally 1,000 shares or more) to buy or sell stocks. Rather than effecting the trades in the customers' accounts, FINRA found, Bretton first placed the orders in a firm proprietary account. He would then increase the price per share for securities purchased by approximately $.02 to $.05 above the market price before allocating the shares to the customers' accounts. Similarly, he would decrease the price per share for securities sold by approximately $.02 to $.05 below the market price before allocating the proceeds to the customers' accounts. This improper price change was not disclosed to or authorized by the customers.
Bretton's trading scheme generated approximately $1.3 million in profits for the proprietary accounts, in which he had a 33 percent interest. Bretton personally earned approximately $429,000 from this scheme.
FINRA found that to conceal his fraud, Bretton entered false information on the corresponding order tickets regarding the share price and the time the customer order ticket was received, entered and executed. Moreover, the corresponding trade confirmations inaccurately reflected the price, mark-up and/or commission charged and the order capacity.
Finally, Bretton also failed to cooperate with FINRA's investigation by failing to comply with his obligation to appear for investigative testimony.
In settling this matter, Bretton neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2009, members of the public used this service to conduct 18.5 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-2999.
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